Connacher to Spin Off Argentinean Interests

Connacher Oil and Gas reports that merchant bank PowerOne Capital Markets Limited of
Toronto, Ontario will work with Connacher to divest its Argentinean oil and
natural gas interests to a new public company (Newco).

This is an important transaction for Connacher as the company continues
to strengthen its balance sheet and focus on its Canadian assets, with an
emphasis on its significant oil sands holdings at Great Divide, Alberta and
its extensive land position and growth potential of its conventional holdings
at Battrum and Tompkins in southwest Saskatchewan.

In conjunction with the proposed reorganization, Connacher has exercised
a US$1.5 million option, subject to certain closing adjustments, to acquire
the remaining 50 percent working interest in its Puesto Morales/Rinconada
concession in the Neuquen Basin, Argentina. Upon closing, scheduled for later
this month, and in due course upon receipt of government approval with respect
to operatorship, this will result in Newco owning and operating 100 percent of
the 95,000 acre onshore concession. Current production is approximately
360 barrels of oil equivalent per day (boe/d), consisting of 100 barrels per
day (bbl/d) of light 37 degrees API crude oil and approximately
1.6 million cubic feet per day (mmcf/d) of solution and non-associated natural
gas. Monthly net operating income exceeds $100,000, providing cash to fund
overhead and a portion of proposed 2004 and 2005 capital programs on the
block. Capital programs in the near term will largely be financed through the
sale of new equity once Newco is formed. In a reserve report prepared in
accordance with National Instrument 51-101 for Connacher by DeGolyer &
MacNaughton Canada Limited (D&M) with an effective date of October 1, 2004,
proved and probable reserves of 577,000 barrels of crude oil and three billion
cubic feet (Bcf) of natural gas were assigned to the property. Using D&M's
current forecast price deck, these reserves were estimated to generate
$20.4 million of future net revenue (after royalties and operating costs) with
the eight percent present worth of future net revenue forecast at
$12.3 million ($11.4 million at 10 percent). The present worth calculations
are also after deduction of forecast capital requirements of $1.9 million and
a provision for eventual abandonment liabilities of $384,000.

Under the terms of Connacher's agreement with PowerOne, Connacher will
sell the 100 percent Argentinean interest to a wholly-owned subsidiary (Subco)
for shares and a $4-million secured note. PowerOne will then arrange for Subco
to raise $1.5 million through the sale of five million units of Subco, each
unit consisting of one common share and one share purchase warrant. Proceeds
will be used to reduce the Connacher note to $2.75 million. The balance will
be due and payable to Connacher after Subco completes a going- public
transaction and the resultant Newco concurrently raises new capital to fund a
planned $5-million capital program in 2005, and discharges the balance of
Subco's obligation to Connacher. It is expected Connacher will retain an
approximate 25 percent equity stake in Newco after it is publicly financed.
Completion of the transaction is subject to the execution of definitive
documentation and receipt of all necessary approvals, including regulatory and
board approval by Connacher.

The Puesto Morales/Rinconada concession is located in the Neuquen Basin,
approximately 600 miles southwest of Buenos Aires, Argentina. It contains the
Puesto Morales Sur oilfield and the Puesto Morales Norte natural gas field, as
well as the PMX-1001 La Ramona oil discovery drilled by Connacher and
Ingenieria Alpa, a private Argentinean company, in late 2003. This well
encountered a 500 foot oil column and is scheduled to be recompleted as part
of the proposed 2005 work program on the block. It is anticipated an extensive
3D seismic program will also be completed over the Puesto Morales block in
early 2005 prior to initiating a multi-well drilling program. In addition,
plans are being developed to reactivate one well in the Rinconada field
followed by a 3D program over a portion of this block in preparation for new
drilling. Steps have been initiated to acquire additional acreage in the
region, which if successful would increase Newco's land holding to more than
150,000 acres. Numerous farm-in opportunities have also been identified.

Newco intends to focus on opportunities in the Neuquen Basin, initially
emphasizing low-risk development and near-term cash flow opportunities on the
existing concession. As its cash flow grows, Newco will be able to expand from
its current acreage base in an area which is highly prospective, served by
extensive infrastructure, relatively under explored and in proximity to and on
trend with major oilfields.

In consideration for its services, including the initial financing of
Subco, PowerOne will receive $70,000 and warrants to acquire 350,000 units of
Subco on identical terms to those being sold by way of private placement. It
is anticipated PowerOne will also assist Newco, directly or indirectly, in its
planned future financing.

Connacher will manage the affairs of Subco until it completes its going
public transaction, after which it will assist Newco pursuant to a management
services contract, retaining the right to board representation and certain
rights with respect to the appointment of senior management. Management
appointments and the composition of the board of directors of Newco will be
announced as the transactions evolve.

It is anticipated that as a well-financed Argentinean exploration and
production company with experienced management, and an excellent and growing
land base with significant exploitation and exploration potential, Newco will
provide investors with an opportunity to participate in one of a limited
number of junior public oil and gas companies in Argentina, a country which is
experiencing an economic turnaround. The initial production and reserve base
at Puesto Morales provides Newco with a solid and stable revenue stream, which
frees up new capital for modern 3D seismic, drilling and production facilities
as new wells are completed and placed onstream. As the area is characterized
by multi-zone potential but has not been evaluated with modern technology, it
also has exploratory potential. As indicated, the lands are in close proximity
to very large oil and natural gas accumulations with associated
infrastructure, so newly discovered assets can be readily converted to cash
flow. As economic conditions continue to improve in Argentina, it is expected
commodity prices will also continue to strengthen in a low-cost constructive
policy environment.